This project aims to define the basic molecular mechanisms of Hedgehog (Hh) signal transduction in Drosophila. Hh is one of only a few families of extracellular signaling molecules responsible for directing development and regulating stem cell activity in Drosophila and in humans. Consequently, genetic alterations to Hh signaling underlie many developmental disorders and many types of cancer. Pioneering studies in Drosophila identified the central Hh signaling pathway components, which were later found to be highly conserved in mammals. Those advances led to much improved diagnosis of several human syndromes and diseases, and to the development of very promising anti-cancer drugs that target Smoothened (Smo), a key membrane protein that initiates Hh signal transduction. The Hh pathway culminates in altering patterns of gene transcription by modifying the activity of the conserved transcription factors, Ci (in flies) and Gli1-3 (in mammals). Deciphering the mechanisms that connect Smo to Ci/Gli activation is critical to understand Hh signaling and for the development of drugs that directly target Ci/Gli activity. Such drugs would potentially counter pathway activation by any type of oncogenic mutation. Hh signaling is extremely sensitive to the stoichiometry of signal transduction components and must therefore be studied under normal physiological conditions. Drosophila offers the most rapid and incisive molecular genetic approaches to accomplish this. New insights can then be applied rapidly to Hh signaling in humans and other mammals because the components and mechanisms involved are highly conserved. This project seeks to understand how full-length Ci (Ci-155) is activated and how this is integrated with regulation of Ci-155 levels to produce appropriate dose-dependent activation of Hh target genes in Drosophila. One key factor facilitating these objectives is our discovery of the central role of the protein kinase, Fused (Fu) in activating Ci. Hence, one set of aims is to discover the direct target for Fu and how this activates Ci-155. A second key factor is our recent development of genomic transgenes and an efficient gene replacement strategy to investigate the activity of Ci variants expressed at physiological levels. This approach is essential to identify the sites of interaction and ultimate impact of all regulatoy inputs into the terminal effector of Hh signaling. It will be used to study the regulation of Ci-15 levels by proteolytic mechanisms and the regulation of Ci-155 activity by Fu and other central pathway components, Costal 2, Protein Kinase A and Suppressor of fused.